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Are there any Illinois or federal compliance requirements that apply to commercial leases, besides the ECOA and FCRA adverse action notices? Our institution will be leasing out equipment that is owned by the bank. – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

Are there any Illinois or federal compliance requirements that apply to commercial leases, besides the ECOA and FCRA adverse action notices? Our institution will be leasing out equipment that is owned by the bank.

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As a general rule, most compliance laws and regulations are aimed at protecting consumers and not commercial customers. For example, while Regulation M governs disclosures, advertising and other issues related to leases, it expressly states that it applies only to consumer leases. 12 CFR 1013.1(b). However, a few laws might apply to your commercial leases in some instances, such as the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and the Servicemember Civil Relief Act. Otherwise, we are not aware of any other laws that would apply to a commercial lease.

We agree that the Equal Credit Opportunity Act (ECOA) adverse action requirements apply to commercial leases, provided that the adverse action is based on a consumer credit report. 12 CFR 1002.9(a)(3). In addition, the Fair Credit Reporting Act (FCRA) adverse action requirements could apply if, for example, you take an adverse action based on the consumer report of an individual business owner who is guaranteeing the lease. See 15 USC 1681m.

Another law to be aware of is the Servicemember Civil Relief Act (SCRA), which protects servicemembers in several commercial leasing situations. The law protects servicemembers who have entered into military service from the rescission or termination of a lease for “real or personal property (including a motor vehicle)” without a court order. 50 USC App. 532(a)(1)(B). In addition, lease termination rights may apply to a lease of real property or a motor vehicle. A servicemember who has entered into military service may terminate “leases of premises occupied . . . for a residential, professional, business, agricultural, or similar purpose,” provided that other conditions are met.  50 USC App. 535(b)(1). Comparable protections apply to leases for motor vehicles used “for personal or business transportation.”  50 USC App. 535(b)(2). Note that the federal law’s protections extend to spouses and other dependents of a servicemember, provided that “the dependent’s ability to comply with a lease . . . or other obligation is materially affected by reason of the servicemember’s military service.” 50 USC App. 538.

Similarly, the Illinois Service Member Civil Relief Act permits servicemembers who have entered into military service (including a call-up by the Illinois governor, unlike the federal law) and their spouses to terminate certain business-purpose leases. A servicemember may terminate a lease for a “mobile home lot, residential premises, non-residential premises, or farm or agricultural real property,” provided that other conditions under the Landlord and Tenant Act and the Code of Civil Procedure are met. 330 ILCS 63/50765 ILCS 705/16(b)735 ILCS 5/9-206.